If EPS Growth Is Important To You, Preferred Bank (NASDAQ:PFBC) Presents An Opportunity

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Preferred Bank (NASDAQ:PFBC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Preferred Bank with the means to add long-term value to shareholders.

Check out our latest analysis for Preferred Bank

How Fast Is Preferred Bank Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Preferred Bank's EPS has grown 35% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Preferred Bank's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Preferred Bank achieved similar EBIT margins to last year, revenue grew by a solid 28% to US$286m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Preferred Bank's future EPS 100% free.

Are Preferred Bank Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Preferred Bank shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at US$72m, they have plenty of motivation to push the business to succeed. At 8.2% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

Is Preferred Bank Worth Keeping An Eye On?

You can't deny that Preferred Bank has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Before you take the next step you should know about the 2 warning signs for Preferred Bank (1 can't be ignored!) that we have uncovered.

Although Preferred Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.